Wall Street, Main Street, and Martin Luther King Boulevard: A Snapshot of Economic Inequality

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WASHINGTON, DC - JULY 15: Federal Reserve Board Chairwoman Janet Yellen testifies before the House Financial Services Committee July 15, 2015 in Washington, DC.
** Federal Reserve Board Chairwoman Janet Yellen testifies before the House Financial Services Committee July 15, 2015 in Washington, DC.

“George Bush doesn’t care about Black people.”

In 2005, Kanye West’s impromptu critique of then President George W. Bush caused an uproar.
White America balked at his brazenness. Bush decried West’s insinuation that he was “racist”. But for African-Americans, then fixated on the devastation in post-Katrina New Orleans, West’s words rang true.
In hindsight, it was hard to prove Bush’s indifference towards Blacks. While his inaction in the aftermath of Hurricane Katrina spoke volumes—it took three days for Bush to visit the Gulf Coast, and when he did, he touched down in Biloxi, Mississippi, a majority White, Republican town—Bush refrained from incriminating words.

Until last week, the same could be said for Janet Yellen, chair of the Federal Reserve, the nation’s central bank and chief economic regulator. In spite of its enormous influence on the American economy, the Fed has done little, if anything, to alleviate the chronic Black unemployment and perpetual recession that haunts the African-American community.

With African-American unemployment at 9.5 percent, twice the national average since the fifties, Janet Yellen confirmed what many politicians and progressive economists already knew—when it comes to unemployment, Blacks are on their own.

“There really isn’t anything directly the Federal Reserve can do to affect the structure of unemployment across groups,” Yellen said in response to Representative Joyce Beatty (D-Ohio), who asked if the Federal Reserve considered Black unemployment when evaluating the economy.

Yellen, who President Obama appointed in 2014, made the controversial remark during a congressional hearing shortly after reaffirming the Fed’s plans to increase the interest rate at year’s end, a move that will curtail, if not completely reverse, job growth in exchange for lower inflation.
As Rep. Beatty and several other lawmakers pointed out, these restrictive measures disproportionately harm communities of color—communities that have yet to emerge from the recession.

While the Great Recession formally ended six years ago, the story of economic recovery varies depending on your location—Wall Street, Main Street, or Martin Luther King Boulevard. On Wall Street, banks and major corporations are enjoying record profits, a boon that modestly trickled down to Main Street where, over the past 15 years, White American workers saw a $0.45 rise in wages. Key word: trickle.

On Martin Luther King Boulevard, that is, in communities of color, the cloud of recession lingers.
Since 2000, Black wages have actually fallen $0.44. Moreover, between 2007 and 2013, Black household wealth fell 43%, the crippling result of wage stagnation and predatory lending practices at the height of the housing boom.

Just like in the aftermath of Hurricane Katrina, when the Bush administration’s policy of neglect and inaction left the mostly Black people of New Orleans without food, water, or shelter, the Fed’s indifference to Black economic blight has also left entire communities submerged without a life boat.
Jobs are essential to improving Black urban neighborhoods. High crime rates, poor public health and educational outcomes all correlate with joblessness.

Yellen’s remarks are as troublesome as they are erroneous. The Fed can intervene.

The central bank is charged with maintaining price stability and maximizing employment, dual mandates achieved through controlling interest rates. Low interest rates are a boon to American workers as they lead to more jobs and higher wages. Higher interest rates appeal to banks and large corporations who stand to make more money from lending and stagnant wages.

If the Fed cared about Black unemployment, it would refrain from hiking interest rates until recovery reached Black America.
In a tight job market, employers cannot afford to discriminate as they can when the economy is slack. Hence, in an up economy, wages rise and racial inequities fade, just as they did in the nineties during the Clinton Administration, when Black unemployment fell 4.5%.

In an ideal scenario, the Fed would perform a delicate balancing act, weighing both the interests and needs of corporations and workers, which are most often at odds. In reality, the bank’s policies reflect bank and corporate interests, an approach to economic regulation that has fueled escalating income inequality.

As in all things American, equality is a matter of representation. All ten members of the Federal Open Market Committee, the group that actually sets monetary policy, are White; and with one exception, all ten members are current or former bank and corporate executives. The committee is far removed from the concerns of Black America, or even average working Americans, and there’s little that the voting public can do about it.
Unlike other governing boards, the federal reserve system is largely isolated from the democratic process. The system operates as an independent bank, unaccountable to any branch of government, with appointed positions.

It’s easy to forget that the 1963 March on Washington called  for both jobs and freedom, and while much has changed since then, Black joblessness hasn’t budged. Economic disparities between Whites and Blacks remain the same today as they were over  50 years ago. In fact, the wealth gap has tripled over the past 25 years.   There are a number of contributing institutional factors,  but no plan for recovery can work without underlying job growth and low unemployment. Federal intervention is paramount.

In the calls for social justice that dominate today’s headlines, African-Americans cannot lose sight of the economic justice which still eludes them. Janet Yellen’s remarks may not be as incendiary as a confederate flag, at first glance, but they are just as menacing. Her apathetic response reflects a legacy of racist economic policies designed to trap generations of Black Americans in poverty.

 

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